Qualifying for an Offer in Compromise requires a thorough investigation I often speak on Tax Debt Settlements, known as "Offer in Compromise." Taxpayers continue to believe that this is a simple process. I'm here to set the record straight.
It's incredibly difficult to qualify for an Offer in Compromise. The IRS will perform an incredibly thorough investigation. This is the most thorough financial background check that is performed by the IRS. They won't sacrifice thousands without exceptional cause! Here's a few things they consider:
Can you pay the debt in full before the statutes run out? If the IRS determines you can pay the debt (even in installments) before the statutes run out, your Offer will not be approved.
Projected Income & Potential: You may be unemployed now, but you could be making $100K when you find work again next year. The IRS will look at the income you've made before and consider the income you'll make in the future, when you apply for an Offer in Compromise. This means you can be broke now, but still have to pay!
Assets and Savings: If you have vacation homes, yachts, etc; the IRS will determine the market value for these assets. When you receive your Offer in Compromise rejection letter, you'll see the IRS' determination that you can pay the debt in full (or more than the debt amount!) and they will list each asset and it's market value. If you're living big without paying the IRS, expect to pay big.
But there's hope. If there is no way you could pay your tax debt in full before the statutes run out, the IRS may allow you to settle. If you think you qualify, use IRS Form 656 Offer in Compromise, or work with a reliable CPA or Tax Resolution Professional. With help, you could Settle your Tax Debt and save thousands.